Steps to Starting a Business
Starting a business is exciting—but also demanding. It involves planning, making key financial decisions and completing a series of legal activities. These easy steps can help you plan, prepare and manage your business.
Write a Business Plan
An important first step is preparing a business plan to define your business, products and services, and outline your goals, operating procedures and competition. If your company needs funding from a traditional loan or venture capitalists, a business plan will be required. Make sure your plan includes a marketing approach, so people are aware of what you’re selling and how to find you.
Choose a Business Location
Get advice on how to select a customer-friendly location and comply with zoning laws.
Determine the Legal Structure of Your Business
Decide which form of ownership is best for you: sole proprietorship, partnership, Limited Liability Company (LLC), corporation, S corporation, nonprofit or cooperative. Incorporating your business or forming an LLC with the state is important because it protects your personal assets from business debts and liabilities. Other benefits of forming a corporation or LLC include tax advantages and greater credibility with customers, vendors and business partners.
Register a Business Name
Registering the business name establishes the identity of your creation. Create a business logo, cards and stationery. These items establish your company’s brand and help potential customers find and remember you.
Get a Tax Identification Number
A federal tax identification number, or employer identification number (EIN), acts like a social security number and is required for corporations and LLCs that will have employees. Contact your state’s taxation department to learn if a state tax identification number is required in your state. Also keep in mind that most businesses need licenses and/or permits to operate—in your city, municipality, county and/or state.
Open a Business Checking Account
It is crucial to separate business finances from personal ones, so open a business bank account. Most banks require company details, such as formation date, business type, and owner names and addresses. If your business is not incorporated, most banks will require a DBA (doing business as or fictitious business name). Contact your bank about requirements prior to opening an account.
Obtain Business Licenses and Permits
Get a list of federal, state and local licenses and permits required for your business.
Understand Employer Responsibilities
Insure your business and investigate other requirements. Some industries have specific insurance requirements. Discuss your needs with your insurance agent to get the right type and amount of insurance. Remember to look into any other government tax and insurance requirements that might apply to your business, particularly if you have employees. For example:
- Unemployment insurance
- Workers’ compensation
- OSHA requirements
- Federal tax
- State and local tax
- Self-employment tax
- Payroll tax requirements (such as FICA, federal unemployment tax, and state unemployment tax)
- Sales and use tax